May Copyrighted works be resold in the US without the publisher’s permission?

The Supreme Court is set to hear arguments this week in a case involving the resale of copyrighted works in the United States that were originally manufactured and sold abroad. The hearing follows a $600,000 appeals court judgment against a college student, Supap Kirtsaeng, who sold foreign editions of textbooks online to pay for his tuition. Key to the Court’s analysis will be its interpretation of the “first sale doctrine” and how that intermeshes with policy surrounding “gray market” goods. Under United States intellectual property law, an owner’s rights to a particular copyrighted or patented article are usually exhausted after the first authorized sale of the article. The lawful purchaser is then free to dispose of that particular article as it sees fit without having to answer to or further compensate the original rights owner. Simply put – you bought it, you own it.

While it is clear this “first sale doctrine” applies to works made and sold in the United States, there is ambiguity as to its application to works made and sold abroad and then resold in the United States. Companies often sell the same product for different prices in different countries in response to a variety of factors, such as tariffs, consumer demand, and the income level of consumers there. This is common for retail and other products like pharmaceuticals. Savvy businessmen (or sleazy criminals depending on your perspective) may seek to purchase goods lawfully sold in another country at a steeply discounted price, and export them to the United States to sell at a higher price, thus turning a nice profit. Such products are termed “gray market” goods, as they’re the subjects of transactions that fall somewhere between the up-and-up and black market dealings. Rights holders argue that such transactions cost them billons of dollars in revenue a year.

The main issue for the court to decide is whether a publisher’s copyrights are exhausted under the first sale doctrine when a work is first lawfully sold abroad and later resold in the United States. The implications reach far beyond the bottom lines of publishers and patent holders. Attorney’s for Kirtsaeng argue that an adverse ruling could shut down public libraries, push domestic manufacturing overseas, and complicate distribution of electronic media (ebooks, etc). Specifically, they warn that libraries might be forced to audit their entire collections for works made and first sold abroad and possibly pay a royalty to publishers in the event they want to keep them.

They further warn that companies will be financially incentivized to move manufacturing and publication abroad, as they could profit from both the first sale and subsequent resale of goods to the United States, rather than receive a single take from direct U.S. sales. Still further, in today’s world of electronic media, they argue that it would be complicated (if not impossible) to ascertain the source of such goods, resulting in increased cost and risk to distributors (which would inevitably be passed on to consumers). On the other hand, the entertainment industry cites lost profits and lack of incentive to create works or invent as justification for strict limits on the application of the first sale doctrine to gray market goods.

Source: http://www.cnn.com/2012/10/26/justice/court-student-copyright/index.htmliphoneemail

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